PRC-2 · Chapter 5 · Question 31 of 50
When evaluating a long-term capital project, if the Net Present Value (NPV) is strictly greater than zero, what does this mathematically signal?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) The project is adding value to the firm, as its discounted cash inflows exceed its initial cost.
Explanation
A positive NPV indicates that the project is profitable even after accounting for the time value of money and the cost of the original investment.
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